Analyst Actions: Intel, Chipotle, International Paper, Starbucks
FBR Capital reiterates market perform
FBR Capital analyst Craig Berger says Intel posted stronger-than-expected first quarter results but issued somewhat tepid second quarter guidance, which will likely drive some "sell-the-news" profit taking in the coming days.
Berger notes that Intel's first quarter EPS was aided by better gross margins ($0.04 upside), better taxes ($0.03 upside), better interest income ($0.01 upside).
For the second quarter, the company again declined to issue formal revenue guidance but instead said it's planning internally for sequentially flattish sales.
Berger raised his $0.50 2009 EPS estimate to $0.60, but kept his 2010 forecast at $0.80. He maintained a $14 price target on the stock.
Chipotle Mexican Grill (CMG)
Jefferies & Co. downgrades to underperform from hold
Jefferies & Co. analyst Jeff Farmer lowered his rating on Chipotle Mexican Grill stock to underperform from Hold. But he raised his price target on the stock to $62 from $45 due to its conservative margin outlook, better-than-expected profit flow and lower-than-expected commodity costs.
It may take a while for traffic at the chain to bounce back, he said. The company is also dealing with lower productivity at newer stores and may have trouble raising prices, he said. He thinks Chipotle is unlikely to be able to hike prices by more than 2 percent to 3 percent next year, following a 6 percent jump in 2009, the analyst indicated.
The customer traffic and pricing troubles give Chipotle little room to expand its margins, Farmer said in a note to clients. Chipotle, which serves up tacos, burritos and salads, may have to wait a while for customer traffic to pick up, as the restaurant sector traditionally can stay on the decline "for years - not quarters" after posting a drop-off for two quarters.
International Paper (IP)
Deutsche Bank upgraded to buy from hold
International Paper shares rose Wednesday after an analyst upgraded the forest products company, saying the stock is a bargain and its earnings appear to have stopped sliding. Deutsche Bank analyst Mark Wilde upgraded the shares of the Memphis, Tenn., company to buy from hold.
Wilde said International Paper's costs are declining and it should be able to generate about $1 billion in free cash flow this year, which is roughly a third of the company's market capitalization. "We are finally seeing hints of a cyclical bottom," he wrote. "Pulp demand is again strong in China, and the rate of decline in box demand may be easing."
Despite the upgrade, Wilde kept his target price at $11 and warned that first-quarter results (coming out April 30) could be modest. "First quarter was likely a very tough volume quarter for IP. Industry shipments were very weak, and IP likely took a disproportionate share of industry downtime in both containerboard and uncoated free sheet."
Deutsche Bank downgraded to sell from hold
A Deutsche Bank analyst cut the opinion on Starbucks shares to sell, with a $7 price target. Competition will continue to weigh on the company, which likely needs to close more stores, the analyst said.